>> i was really interested in your comments on education and the real scam that's happening where kids are taking on debt for degrees or non-degrees that will not enable a better future. >> we'll break away with reminder you can see this in our video library at c-span.org. u.s. senate ofgavelling in momentarily for a preproforma session honorable maria cantwell a senator from the state of washington to perform the duties of the chair. signed: patrick j. leahy, president pro tempore. the presiding officer: under the previous order, the senate stands adjourned until 2:00 p.m. on tuesday, -- on friday, -- on friday,

posted by the progressive policy institute looking at the fcc's open internet policy. earlier in they, the fcc voted along party lines to move forward on a proposed rule that would allow content providers like netflix to pay for what's called fast lane service. this discussion in washington set to get underway in a couple of minutes. we will stay here live with one quick note from one programming note about the white house. president obama reportedly today will announce you seeking to keep 9800 troops can use troops

in afghanistan after the war formally ends later this year and then will withdraw most of those forces by 2016. according to senior administration officials reported by "the associated press." we'll have the presidents statement this afternoon at 2:45 p.m. live on c-span. [inaudible conversations] [inaudible conversations]

[inaudible conversations] [inaudible conversations]

[inaudible conversations] >> here on c-span2 we are waiting for the start of the discussion looking at the net neutrality rules as promulgated by the fcc earlier this month, a discussion hosted by the progressive policy institute. the fcc chairman chief of staff ruth milkman will be part of the

panelists discussing the. should get underway in a minute or two. we've heard 12 '05 eastern. just a reminder about some of our other live coverage coming up on the c-span networks. developer donald trump will be speaking in washington. washington. is that the national press club speaking at 1 p.m. eastern. later on c-span3 officials from the george w. bush and obama administration will discuss the recent elections in iraq and influence of iran and syria. that is coming at 1:30 p.m. eastern. that will be on c-span3. a reminder, the president speaking this afternoon reportedly about u.s. troops remain in afghanistan after 2014, and his comments at 2:45 p.m. live on c-span. [inaudible conversations]

[inaudible conversations] [inaudible conversations]

>> waiting for this event on the internet and net neutrality to get underway. is a quick look at some of our primetime programming skills and with the senate in recess this week we'll bring you highlights from booktv in prime time. tonight a look at american authors beginning at 8 p.m. eastern.

on c-span tonight former senator chris dodd and army frank will discuss the 20th financial regulatory reform law that bears their name. they are at an event marking the 150th anniversary of the national ranking system. former financial services chairman frank talked about the successes of t.a.r.p. as was the political costs as well and will have that for you tonight at 8 p.m. on c-span. earlier on c-span coming up this afternoon in about two and half hours, president obama will be speaking on troop levels in afghanistan. the ap reporting that the president will seek to keep 9800 u.s. troops in afghanistan after the war formally ends later this year, and then will withdraw most of those forces by 2016, according to senior administration aides. the president will speak at 2:45 p.m. and we will have that live on c-span at that time. meanwhile, on c-span2, waiting

for the start of the event looking at net neutrality about to get underway. live coverage. >> [inaudible conversations] >> well, good afternoon, everybody. my name is will marshall, i'm president of aggressive policy institute and i want to welcome you to today's forum on should the fcc serve as the internet traffic cop. it's a pleasure to see so many people here today, frankly we were worried that we would have some memorial day weekend

attrition. but i can see, you know, the joys of wallowing on beaches is nothing appeared to taking a deep dive into the intricacies of interconnection, which is what we're going to do today. so thank you all very much for coming out. have lunch and debate with us on this important topic. the progressive policy institute has done a lot of work. i know many of you know, on the communications boom in the united states. our chief economist mark mandel is talked about the rise of the data-driven economy, which is the prime catalyst of investment and innovation and job growth in the united states, and has been since the depths of the late recession. we believe that a high growth economy requires regulatory policies that strike the right balance between really important public goals, innovation and investment, in jobs on one side, and protecting consumer

interests and other public values on the other. that cpi -- ppi has done a lot on private or improved. is last with 20 members of congress bipartisan, and republicans and democrats introduced a regulatory improvement commission bill that was modeled on a proposal that we have created to provide a basis for reducing old and superfluous regulations. we think today's conversation is in keeping with this desire to create a regulatory framework for the continuation of this innovation that we've seen in the telecommunications internet sectors. since the 1996 telecom act, the fcc has been striving to get the balance right. we have outdoors, i hope you all get a copy of ppi briefed on this topic called a brief history of internet regulations, compulsively readable, account of how we wrestled with how to

manage and regulate the new information surfaces that have pretty much replaced old style telephony. but today our topic is interconnection. sometimes as you all know that's often conflated with the open internet issue, the issues of net neutrality. we tackled of those last march at a ppi form after the d.c. circuit court's ruling in another program called new principles for progress of broadband policy, but that's a separate issue. that's never the main focus of our conversation today. the question we want to grapple with is whether the terms by which networks connected to create this network of networks we call the internet, up until now negotiated between private to private parties involved should not be subjected to fcc regulation. we have a terrific panel of experts year to discuss that, this forum has been organized by

hal singer my colleague. hal is a pencil economist and also ppi senior fellow and really a player coach when it comes to these issues. is going to be on the panel later and he's also the author of another highly readable pbi policy brief on mandatory interconnection. should the fcc serve as internet traffic cop which i think really a loose to today's issues. and gives us a close analysis of the social costs and benefits of the mandatory interconnection regime which some people have proposed. and offer some very creative alternatives to talk down description for interconnection. now all of this is in keeping with the progressive policy institute's central message to our fellow progressives. if we are serious about expanding opportunity and about reversing economic inequality, and i think we are, we have to protect the environment for

innovation. that's the background against which we're going to have this discussion on come interconnection today. i do like to introduce, really make two introductions in reverse order of the folks you will next be hearing from the am going to call on her keynote speaker up to the podium in just a minute. so first let me introduce the moderator the show will take over white after we hear from our keynote speaker, and then i'll introduce ruth milkman. larry downes is our moderator today. he's done this job for us before, he is marvelous at it. i think you all know that larry is an internet analyst who writes regularly for the harvard business review and forwards and seen it and the "washington post," among others, covering the intersection of tech, politics and business. he is the author of a best seller, unleashing the killer app, which "the wall street journal" called one of the five most important books ever published on business and

technology. he's got a new book out and want to give him a plug for, "big bang disruption," co-authored with paul nunes which challenges the conventional wisdom about disruptive innovation and a businesses deal with it. you will have to read the book to figure out how it does that, but i'm sure it's worth it. also, larry is the project director at georgetown university's evolution of regulation and innovation project. it's a great honor to introduce our keynote speaker who was ruth milkman who i know is known to all the. she's the chief of staff for fcc chairman tom wheeler, which puts her in the vortex of controversy. i'm sure you haven't had many boring weeks lately. but she is now serving a second stint as chief of the fcc's wireless telecom bureau. and in between the stance she was special counsel to the chairman for innovation and government. between 1986-1998 she served as deputy chief of international and common carrier bureau and the senior legal advisor to chairman reed hunt pictures also

a founding partner of a law firm and served as a law clerk to judge harvey wilkinson of the u.s. court of appeals for the fourth circuit. so we are all very fortunate today in the midst of all the controversies that are swirling around the fcc, she's able to take time out and give us the benefit of her experience, deep expertise on these subjects. so without further ado, ruth, please come to the stage. [applause] >> thank you, for that nice introduction and for inviting here and for organizing such a great group of speakers on this really, really important topic. i've been a communications lawyer for more years that i would care to admit, but before i became hooked on telecom

policy i was an english major. one of the great novels of the 20th century in english literature is a book called howard. it has a to word processed, only connect. so i'm one of the few people who can honestly say that my degree in english literature actually prepared me for my career at the fcc. since i joined fcc in 1986 in government and in private practice i've been interested in interconnection issues for a long, long time so i'm really delighted to be here today and to kick things off with a few thoughts. interconnection, of course, is key to all successful networks. and network by definition connects, first the network connects component parts to one another. and that forms a whole and interconnection takes this to the next level. so interconnection is just a connection of one network to another to form the network of

networks that will marshal reference. these connections and interconnections drive the networks valley. you are the source of the positive network effects that benefit the public and that's why from the very beginning interconnection has been a source of public policy concern. this link between interconnection and success, it's true of all networks. so they think about the nations of railroad system, which evolved from short lines in the mid-1800s to regional lines interconnecting cities and eventually a transcontinental railroad network connecting the nation, allowing passengers and goods to traverse the country with unprecedented speed and ease. so, too, the electric grid. electrical networks in the united states again it's in solar systems that service specific geographic areas, but with the advent of long distance

power transmission and the electrification of the country in the early 20th century, the electric grid evolved into widespread interconnected network spanning large distances and allowing electric utilities to reap the benefits of economies of scale, increased reliability, and load-balancing. the communications networks are no different. the first telephone were not networked but individually wired together for private use. but as use of the device spread, telephones were wired to changes, exchange is wired together with drunks, trunks wired into networks, and eventually networks interconnected to form the public switch telephone network on which consumers and businesses have relied for nearly a century. all of the successful networks share a common theme, the interconnection that led to the network's success was encouraged and sometimes mandated by

governmental efforts and regulatory oversight. but it's important to note that there have been the first regulatory approaches to ensuring effective interconnection. some have involved a lighter touch, others a relatively heavy hand, often price for deletion has been part of the package. at the bottom, however, the fact that a network without connections and interconnections is one that simply doesn't work. disconnected networks do not serve the public interest. with respect to communications networks, the interconnection is part of what the chairman to chairman wheeler has called the network compact, which is that set of network values on which consumers have come to rely and expect from their networks. the internet's connections have led to its value, a platform for competition, for civic engagement, for economic growth.

and as the chairman has said, and the manner in which networks interconnect to exchange internet traffic is a part of the network compact. those valleys that have traditionally covered successful networks. it is a question that must concern the commission. let me take a moment to -- by today's event. whether isps should be subject to the interconnection obligation of the kind imposed on owners of public switched telephone networks. those obligations are really far from monolithic. i thought it might be worth considering a few different types of interconnection to the public switched telephone networks. first think about interconnection of customer premises equipment, cpe. part 68 rules established standards for allowing technically compatible devices

to attach to telephone networks. no money changes hands. but competitive manufacturers of equipment can build and deploy an incredible variety of voice that equivalent for use with the public network without seeking prior permission from either the commission or from telephone companies. next, consider long distance interconnection and access charges. the availability of microwave transmission equipment after world war ii significantly lowered economic and technological barriers to entry for long distance communication, but to compete successfully, competitors like mci needed to interconnect long-haul pipelines with at&t's local network so they could connect subscribers to nonsubscribers and vice versa. and in large part it was at&t's go to interconnect with such competitors, including strategies involving degradation

of interconnection, that triggered a justice department investigation that in turn led to did the bell system break appeared in 1982 the fcc approved a new post-divestiture access charge one which was an important component of competition in the long distance market. wireless carries face a different international landscape. wireless providers have long been operating pursuant to whether essentially built arrangements for wireless to wireless interconnection, and this networ work has proven sucl for the wireless industry. in addition to decrease in price of wireless and wireline interconnection over time has facilitated growth. or at least growth in wireless. and finally one more wireless example, and i can't help you do all these wireless exams because that's what i spent most of the last four years doing. think about voice and data roaming obligations for wireless providers, another form of interconnection. recognizing the importance of

roaming for mobile consumers, the commission has required for a number of years mobile wireless service providers to provide automatic voice roaming, and in 2011, the fcc adopted rules requiring facilities state providers of commercial mobile data services to offer data roaming agreements to other such providers on commercially result terms and conditions subject to certain limitations. for both voice and data, mobile wireless service providers into into roaming agreements with each other so that their customers will be able to roam and receive service automatically, regardless of their location. so turning back to interconnection for isps, what have we seen and where are we today? as the internet evolves over time, models of interconnection for internet traffic exchange developed, including peering, a transit, and then the use of content delivery networks.

witnessing such arrangements, some people said that peering and paycheck it could be the model for interconnection pricing for all types of communication networks, not just internet background. they suggested that the fcc could get out of the business of writing the interconnection and communication networks altogether. others said that peering and transit arrangements were the result of an unusual set of circumstances and were not transferable to other communications networks, and, indeed, might not even be stable for the backbone providers. over the years i think it's fair to say that interconnection between isps has not always been seamless at an october 1996, 2 large isps cut off their peering connections for over a week due to a dispute. in the winter of 1997, you jeanette, mci and ddn, key members of the commercial internet exchange let the router

which was the first commercial interconnection point. similar incidents continued into this decade. for example, in 2005 level three terminated peering arrangement with cogent and a 2008 coach of terminated its peering agreement with collegiate. we're also aware of more recent disputes have erupted between comcast and level three in 2010, in between cogent and comcast and verizon earlier this year. rather than the peering out right, these disputes seemed to involve the degradation of service arising from congestion at peering point, particularly during peak usage times. and with such disputes as a backdrop, the fcc has received a number of points of view on the manner in which the current traffic exchange are or are not working. to one question might be this. are these disputes just business

negotiations that can be resolved adequately in the marketplace, or are they a warning sign of a breakdown of the functioning marketplace on the internet? we don't know the answer, are we at the fcc don't know the answer. maybe you in the audience do, but we know that we need to learn more about how the marketplace is or is not functioning. so how will the commission learn more? the commission will be reviewing information about interconnection on the internet and a number of contacts. first, as you all know the fcc recently adopted a notice of proposed rulemaking regarding rules to protect and promote an open internet. the question of how networks exchange internet traffic such as through peering is outside the scope of the 2010 open internet order some parties have

sought to expand the scope of the 2014 notice to include issuing to internet backbone providers including issues of traffic exchange. we are seeking comment and/or tear from those who may disagree with the suggested treatment of peering and traffic exchange and we'll learn from those comments. in addition we expect the parties will continue to raise concern and provide information to the commission about isp interconnection practices. these avenues and no doubt others will serve the commissions and the publics interest in gaining a better understanding of traffic exchange on the internet today. but at the moment we have many more questions than answered, and for that reason among others i'm very much looking forward to the discussion of the panel today and in the future, future

discussions on these interesting and important topics. thank you. [applause] >> thank you very much. i'd like to ask the panelists to all come up now, and we will get mike up. -- microphone up. while we're doing that, let me tell you i'm not going to give long introductions to give the full bios we decide will just briefly introduce my panelists once they've had a chance to sit down. ..

turn it over to john. thank you. >> thank you. so all i will be doing is telling you everything you ever needed to know about interconnection and networks in 15 minutes and what the fuss is about. start with, the internet feels like one big network, when we use it. but, if that were the case there would be no such thing as interconnection. the actually the internet is a

network of networks. there are in fact over 66,000 independent, autonomous networks somehow work as one and each network in there is connected to one or more neighboring networks and that means, information that i send may travel from network to network to network before it finally gets to its intended recipient. so, for example, i have a student right now in uganda and i sent her a message this morning. amazingly from whatever network i am at, it somehow figures out how to get my message to her in uganda. there are real challenges here. one of them, how does the network i'm connected to, know which of its neighbors can move that file toward her? that's technical problem. that is a routing problem. also, not only does there have to be a path all the way to uganda, but every network along the ways that to be willing to carry the information. brings me another question. why should it? there has to be a cost to this,

has to be some intent tiff. the solution to both of these challenges is buried in the magic of interconnection agreements. an interconnection agreement where two networks come together agree on technical and business issues of exchanging internet traffic, including, will i carry any of your traffic, if so, which traffic will i carry. talking about internet traffic, which described, telephone world, even though technology converge something quite different. this is internet. don't, and these agreements are unregulated and typically highly confidential. we don't really know what the agreements look like between most networks. we do know they fit two basic categories. they are peering and transit. let me talk a little bit about each of those possibilities. pair something where networks recipro alley, provide connectivity to each other's customers. in this figure and i should thank bill norton, i'm using his

great figure here, in this figure, we have a green network and a blue network that are peering with each other. that means announcement flows from the green network to the blue network says, hey, if you want to talk to any of the customers of the green network, they're over here. i know how to reach them. send me your packets. and a similar announcement goes the other way, from the blue network to the green network. that solves our technical problem. now all the customers of the green network can talk to all the customers of the blue network. similarly in this figure, the blue network is peering with the red network. so all of their customers can talk to each other. note peer something not transsieve. green and blue are peering, blue and red are peering, but customers of the green network have no way to communicate with customers of the red network, not through peering. we need something else for that. so that technically what is going on. in terms of the business arrangements they vary.

traditionally, historically, peering was settlement free. we'll search eve other's customers and no money will exchange hands. that worked among peers and equals, if a small network approach as large network today, that small network will be asked to pay money. that is paid peering. technically the staple but there is money involved. the other arrangement is transit. through transit one network is able to provide access to the entire rest of the internet. some subset of it they agreed to. so, in this case, we have a customer and a transit provider, the light blue network in my slide is the customer and it is going to the orange transit provider, saying let me communicate with all of the internet. and the transit provider says, here, i will send us announcements, here is every network in the world that i know how to reach. if you want to communicate with any of them, just send me your packets. i know how to reach them. and similarly all the light blue

one sends announcement, if you want to talk to any of my customers, here is where you reach those. once those are exchanged, anybody in the light blue network can communicate to anyone anywhere in the world, assuming the transit provider knows everybody. everybody in this case, includes both transit providers direct customers. since this transit provider in my figure is peering with the yellow transit provider, it includes the yellow transit provider's customers too. technically that is what is going on. business arrangements, well the light blue network here is going to pay, and they are going to pay depending how much traffic they send to the transit network and how much traffic they get back from the transit network. once you put those two types of agreements together you can put, create a little order in the chaos that is the internet. you can create something called a tier one network. a network is tier one if it is able to send traffic to the entire internet without paying anybody any peering or transit

fees. is not easy to be a transit network or a tier one network. you have to know about all those 66,000 networks in the world. you have to run a big infrastructure. you have to be a highly reliable. it's a lot of work. once you do this you're in a new business. you can now offer transit services to any isp who wants it for a fee, which is exactly what happens. tier one networks, charge, tier 2 networks to provide transit service. tier 1 networks compete with each other to do this there is a lot of competition. tier 1 networks peer, not generally, peer with each other settlement free. you see the hierarchy where the red tier 1 networks are connected to each other and tear 2 networks get their transit service from tear 1 and some cases smaller networks get their service from a tier 2. that is the internet at least as we understood it about a decade ago but it's been changing. there are a few new things we need to understand.

one of them is tear 2s a decade ago generally didn't connect with each other, that's been changing. more and more tear 2 networks are peering with each other to bypass the tear 1. in my top figure here in the slide, you see, ispa and ispb, both connected to a tier 1 transit provider and all the traffic flowing between them goes through that transit provider and they pay for it. you say what if they were to direct connectly as if in the lower figure? that means both of them would no longer have to pay transit fees for that traffic. they save money. on other hand there is a cost. they have to pay for peering connection which costs real money. basically if there is enough traffic flowing between them this deal can be worthwhile and they can save some money. increasingly we're seeing tier 2 networks peering with each other. another change over the last decade is the rise of content distribution networks or cdns.

traditional way of thinking about this is the left side, the left figure in my graph and my slide where content provider says, all right, here is my content, everybody in the world come get it from the servers but they may have to get it from all the way across the internet. that is slow and inefficient and actually much better if you can have them get that content from someplace close by. so they rely on cdns which are a collection of geographically distributed servers which copies of content can be stored. there are companies like akamai and limelight and others that offer this service. some build their own networks which can be quite big. of course if you're really big, you don't have to go to a cdn at all. really big might in this case look like google which run as huge, global network, carrying an enormous amount of traffic that they just run themselves and they can interconnect directly with their very large networks because they're very large themselves. so when you put all of that

together, if you are a content provider and you want to get your content to say, customers of a given isp, how do you do it? you have three main choices. one of those choices you can build your own big network and you wan peer directly with that isp. second choice, you can contract with a transit provide, a bunch of them out there and the transit provider will carry your traffic from your system over to that isp and reach those customers. or, a third option you can go to commercial cdn and say, you host my content near those customers. any of those are possible. well, actually whether a cdn makes it depends on your application. for some application this is is great idea and for some it doesn't work as well which is another question. let me bring to the most controversial discussion in this world which is the comcast and netflix discussion. start with a caveat. i have no idea what is going on with comcast and netflix.

i read lots and lots of accounts, but everything i read i consider basically from unreliable sources. so i will be a little careful here but it seems that netflix is, for a while, served comcast customers via transit network such as cogent and level 3 and probably a few others and netflix and also cogent were complaining that there was congestion on the transit connections. and after a while we know that netflix and comcast announced that they are in a peering arrangement. we assume it is paid peering. that netflix is paying. so how do we understand this? how do we think about this? let me first talk about how i think we should not think about this but a lot of the press articles i read seem to. they annoy me and matter of therapy i i want to spread my annoyance on to all of you. there is a narrative that says, if content-heavy network like a network with lots of netflix content peers with an provider like comcast, one group says

this inevitably transit traffic a burden on the content provider so the content heavy network should pay the cost of this burden. there is another work that says this kind of peering arrangement inevitably generates traffic that benefits both networks so the peering arrangement should be settlement free. both of these arguments are wrong. you start to see that they're wrong, peering doesn't generate traffic. end systems generate traffic. if i am a customer of comcast and i want to watch a netflix video and netflix is willing to show it to me, the netflix video goes through the comcast network, peering, no peering, doesn't matter. is the end systems that generate. now there are cases where peering matters but we need to peer a little more closely in terms of how much traffic comcast would have to carry. it matsers if end systems react to congestion in the network. they end the peering path and

transit path, one of them is much more congested than the other and that actually seems to be what is going on here, right? what seems to be happening, we think, is that there was congestion in the transit links but the direct peer did not have that congestion. why does that matter? some application it is wouldn't. so happens for netflix streaming if you're watching a netflix video and you're watching high-definition and congestion comes along, that application will automatically revert to low definition. so it will back off because of that, congestion reduces the load. so, seems by both accounts there was congestion. the interest question is why. first of all, stress, part of the point of story is you can't look at peering relationship in isolation. you have to look at the broader context to make sense of this. the interest question is why. there are some people who say, well, comcast likes the idea of congestion on their transit links. it got companies like netflix to enter into this paid peering

arrangement and have to pay comcast. there are others who say that is ridiculous. comcast wouldn't like congestion. note that wouldn't just affect netflix. that would affect a lot of traffic and comcast says this was about cutting out middleman. this was about saving transit fees. if it was about congestion those transit providers were being unreasonable and weren't doing their part to relief it. which of these story is right? i don't have a clue. i have only got unreliable sources here. let me wrap that up. interconnection agreements are a central part of making a network of network like the internet work. they take lots of forms. there is peering, there is transit, there is paid, there is unpaid. all the result today of private, unregulated negotiations and those agreements are changing. there are new rules for cdn and content provider networks. an increasing number of peering relationships and changing financial terms and the question is why? maybe we'll address that in the next panel.

>> thank you. [applause] >> [inaudible]. we have discussion on number of fronts about this before i introduce my panelists, i want to tell you if you're following this discussion on twitter, the hashtag for our event today, is hashtag fc cnet rules. fccentrules. if you have questions and comments as we're going feel free to do so. i have extremely distinguished panel to talk about these issues from variety of standpoints. i will introduce them real quickly and i will tell you the layout of all of this. i will ask everybody a opening question and ask everybody a closing question at the end. i have about three hours of questions clearly we'll not get to. we'll save time at very end, last 20 minutes or so, for your questions. if you have them, prepare them

and we'll get to you when we can. let me introduce the panelists from my left down to the end. first is kevin warbacmh associate professor the legal studies and business ethics at university of pennsylvania of are worth ton school. hal singer, progressive policy institute and principal with economists incorporated. professor jer fahlaber, professor emeritus business ethics an public poll i wharton business school and chief economist of fcc. anna maria coke evacuations. georgetown, policy center and. -- cove evacuations. kovacs. start with a quick question for all of you. john just explained that interconnection with refers to the back end of internet. currently it is regulated it is by thousand thousands of these private and confidential

agreements between network operators, most of which are so far, at least we understand are done even on a handshake basis. not a lot of them are even written down. i will ask each of you very quickly to give me your top line here. what role, if any do you think the fcc should be playing in regulating those agreements? i will start with kevin and go down the line. >> sure. i think he started us off exactly in the right place which interconnection is essential to all communication networks and essential to internet. i think it's a false dichotomy to suggest there is this internet world and which is this purely private nirvana and there is this communications world and there is heavily regulated area where the fcc decide on every agreement. that was a false dichotomy in the past. it is more of a false dichotomy now as we go into the future. those worlds are converging. we're going into a transition where the public switch telephone network is converging into an ip network. the fundamental question in that environment, is it appropriate to say, there is no role for a

public policy backstop? i think that would be the wrong approach. i think for all the reasons that we've heard, interconnection is essential and, interconnection is a key opportunity for anticompetitive behavior. and for results that would constrain the information ecosystem. so i think it is absolutely right to say the fcc should not micromanage the process. for the most part it shouldn't be setting prices in the same way that it has for regulated incumbent telecommunications carriers. but i think it is important to have an fcc public policy backstop. one of the reasons was the reason that john gave us. we don't know. we're all speculating about this because all of these agreements are totally outside of the discussions that we have in public policy circles. but, all along, the fcc has been there in the background. the fcc never said, we're never going to have anything to do with internet interconnection.

what they said was, we belief traditionally this is competitive market we don't need to get involved in. that was a factual determination. the world is changing. >> okay. hal? >> thanks. i look at this from a economic perspective, simply, what are the benefits from imposing mandatory interconnection, what are the costs and i tried to lay those out in a short policy brief that was left with you and very quickly on the benefit side of the ledger, if you force these networks to interconnect you might be able to minimize the amount of disruptions. certainly disruptions of anyone's service impose as serious cost but in my review of the episodes looking back in history of the internet, we don't see a lot of disputes. he mentioned a few but in fact what struck me with how few there were relatively could have occurred. i counted to six major disputes and only half led to service

outage for consumers and other half it led to disruptions of three, four, five days. that is on the benefit side of the ledger. it is something and it is not huge. if the probability of these disruptions occur something close to zero, then the expected benefits of imposing mandatory interconnection is small as well. on the cost side of the ledger, what i'm worried about you start telling networks they must connect, you could up sate the maker decision. could upset goals of section 706 which is to encourage deployment. some people point to sprint and t-mobile's reluctance to deploy their spectrum into rural areas. they point to the fact that mandatory interconnection in data roaming agreements causes them to make the bayh decision. wonder what it would do to incentives for isps and middle mile folks and content providers are getting a little taste what it is like to be last mile access. i lay out the costs and benefits

and i'm worried the costs may exceed the benefits. that would cause me to look for something a bit less interventionist or less invasive than outright mandate or obligation to interconnect. >> jerry. >> i also an economist. i take an even simpler view than hal does here. my question is what works? okay? and to note also, interconnection is not just a communications issue. it occurs in virtually any business which the producer of something, that could be canned peas or they could be movies has to distribute something to customers through distributors like supermarkets or comcast, okay? they all do this, via, voluntary private agreements. all over the economy. and what do we see? we see competitive markets, we almost never have any trouble. so, my question is, do we want to regulate this?

for lord's sakes why? this is distributing. distributing peas through such supermarkets works. nobody is calling for regulation of supermarkets because of this why are we calling for regulation of internet access? because it has changed? look, you have 30 years of success of where the problems are at most diminimus. why are we going to come in here and say, oh, well, the fcc has to look at this. they have to look at these agreements. we have to see whether they are correct. the fcc has a pretty terrible reputation as an adjudicator. why is that in any sense going to improve matters? seems to me this is really clear. we have a civil that works. stay away from it. >> anna maria? >> my background is as a financial analyst following telecom for a very long time and so i have a very long memory of all of the disputes over access

charge, settlement rates and international arena, all of that relative to that, i think what we've seen in the way of disputes around the internet in terms of disputes on transit are truly minimal and so i also come down on the side of saying, it is essential that everyone be able to interconnect but we have now several decades of history in the internet saying that private agreements can in fact, commercial agreements can get us there. and barring a breakdown, we really should not be intervening because the rigidity that regulations would bring to the system would probably create far more chaos than the occasional disputes that you have between parties. >> john. >> so, if i were to create an

internet from scratch i could imagine cases where you would have problems, you would have market failure, particularly if some big providers had enough market power. i could imagine cases where you wouldn't have any problems. i look at the internet today and i can't tell. i can see something is changing, whether that is indication of a problem or not, i can't tell. seems to me if, for us to say, the fcc shoulding involved, we have to first be able to say there is problem. second be able to say they can do something to make it better. in order to even ask those questions, i would like to see more information gathered. i think that is where the fcc can do something, constructive, is to try and shed a little light on all of those private agreements and see if there is anything we have to be concerned about. >> great. so that's a fairly wide range of opinions. let's dive into this a little bit more. so, kevin and hal, i wouldn't

say dueling papers but you have papers that come at this from a different perspective so let me come back to you guys next. kevin, you've written in all could of papers that interposing the fcc, let as use the word interpose, we won't say how or how detailed, some fcc involvement in interconnection both for voice as we make the transition but i think you said for all traffic, aside from voice, would have a lot of benefits. can you kind of briefly list some of those benefits that you've described? >> sure. and, again, i take issue somewhat with the notion that this is a purely unregulated space where where should fcc been interdisposed. fcc has been there all along even though it hasn't mandated carrier rules for telephone companies and nor should it. it is not right to say the issue is do we have private agreements

and fcc. we could absolutely have lots of room for private agreements but still have a sense there are certain practices which are anti-competitive and regulator there in part to get the data. jon is absolutely right. we need to know more. the data doesn't just appear. the data appears if there is a regime to say that data has to be made available in some way. so there's a lot of ways to look at your question. one of them is, what ruth said is absolutely true. formally this set of issues is distinct from the set of issues we're fighting about network neutrality. this is about what happens to the edge of the access provider's network. it is not what happens on networks of comcast, verizon or at&t when the traffic goes all the way to their end user. that is what the net neutrality fight is about. many ways the same issue. the question is, let's say that what happened in a dispute like comcast netflix is that comcast, the access provider was deliberately degrading netflix's traffic in order to extort

netflix paying it some anticompetitive fee. i don't think that is actually what happened. but by all indication i read the same unreliable sources jon does. seems like this was resolved in amicable and reasonable commercial negotiation but let's say that's what's happening. fundamentally that is not so different from the net neutrality story that comcast or a similar company would do exactly the same thing, degrade traffic and differentiate traffic on its network. so the extent we care about the nature of the information environment that we live in. to the extent that we care about openness to innovation, that we care that any provider can come on the internet with new services and reach customers or reach everyone else without going through gatekeepers that try to keep it out, to the extent we care about i think we need to think about having a regulatory backstop on private

connection agreements. it is not just about the disputes. it is do we believe somehow magically this will work itself out given the way the network is changing, given we have some providers who have some market power? and they have market power certainly once a customer chooses them. even if there are multiple choices for isps, when you have large broadband isps they control the traffic to their customers. so i think in that environment, to say there's no role for public policy, to say some practices are beyond the pale, i think that is troublesome. >> so, this came up at the last conversation but you think when you talk about a regulatory backstop you talk about the fcc, you don't think there's a role or alternative of the ftc in this process? >> i think there is a possibility for the role of the fcc. there are different kinds of agencies. the fcc has expertise in communications and has more of an ability to adjudicate things in real time. given the nature of the way

things have been traditionally done, i think saying this is purely a consumer protection issue which is what the ftc knows how to do, i think that would be too limited but i think that is an interesting debate to have. i think the first principle is to say we need to understand that there is a possibility of real harm here, to consumers and to innovation and to economic growth in the marketplace. and then, yeah, we can have a great discussion about the exact methods. in some of my law review papers i argued for specific adjudication regimes. happy to talk about that but i think the first principle we can't just start with the notion that anything goes. >> and hal, to your paper, the one you have today in fact for us you look at more of the cost side of the equation here. can you list off 4some of the costs endeared to the system if we had more role of fcc in the near future. >> upsetting incentives of is

purchases to continue to deploy and expand their networks. i also mentioned quickly what happens if now google or content provider or even a transit provider knows it has the fcc's backing when it goes into these negotiations. it might decide at the margin not to make certain last mile investments in its network. i guess another cost i add, i think i offered eight of them through the paper, i won't take you through eight now, but another one i'm worried about unraveling content agreements between content providers and i is sps. netflix and comcast voluntarily enenterred into agreement. if netflix looks out the window, that cogent get as better deal, that would upset voluntary agreement. why would that upset an economist? there is something efficient by them doing a deal. puts costs where it should be and put downward pressure on price of broadband access f you're telling isp is the only way to raise money on backs of its customers.

can't make money off transit and cdn service you're basically putting upward pressure on access prices for consumers. >> okay. jared, let me come back to you. say a little bit more, you're pretty clear and firm about your position on this. what other elements go into your thinking that a case against fcc involvement interconnection is so strong, based on your economics, based on your experience, based on both? >> two things. let me mention first that for the decade from 1990 to 2005, the fcc said everything it could in every possible language that said, we're never going to regulate the internet. that's a really stupid idea. . .